Legal pressure on Binance, the world’s largest crypto exchange, has underscored the potentially “chilling” effect of a U.S. crackdown on crypto, legal experts have told Decrypt.

The company is facing scrutiny from multiple agencies, including a suit filed by the Commodity Futures Trading Commission (CFTC) against both Binance and its founder Changpeng ‘CZ’ Zhao last month.

Per a report from the New York Times, Zhao has hired white-collar defense lawyers from law firm Latham & Watkins to represent him personally amid the gathering legal storm.

Court documents filed on Monday show that lawyers at top firms have been brought in to represent both the company and Zhao himself in the case.

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Meanwhile, the Department of Justice is investigating Binance’s conduct in a probe led by its money laundering squad, Reuters reported. At the same time, the Securities and Exchange Commission (SEC) is looking into the company’s business practices, the New York Times reported.

This week, Binance’s U.S. arm called off its acquisition of bankrupt Voyager Digital’s assets, a deal that had met with opposition from several regulators including the SEC, though it had been approved by a judge. Commentators including Ava Labs president John Wu put the backtrack down to regulatory uncertainty in the U.S.

“The U.S. in terms of creating certainty is just falling behind everyone else,” Wu said in an appearance on CNBC. “The U.S. is going to continue to lose companies, development.”

Decrypt has contacted Binance PR representatives for comment.

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A ‘complex landscape’

Binance’s troubles come at a tense time for relations between the industry and regulators in the U.S., highlighted by Coinbase’s legal action against the SEC this week to try and force the agency to respond to demands for clearer rules.

But William Kraus, partner at FisherBroyles LLP, warned against seeing Binance’s difficulties as a direct response to the current climate.

“While it might seem as if Binance is being targeted because of recent political pressure to regulate digital assets, it is important to remember most investigations are conducted confidentially for years before the public learns of them,” he told Decrypt. “As seen in the CFTC complaint, the investigations frequently revolve around alleged past conduct or relate to issues that have since been remedied by the business.”

However, he added that the CFTC case and the reported investigations signal to crypto businesses looking to operate in the States that they will need to navigate a “complex and frequently changing legal and regulatory landscape”.

Sam Tyfield, a corporate M&A lawyer at British firm Shoosmiths, told Decrypt that recent events indicate that there could be a potential “chilling” effect on the market from the strict approach of American authorities.

“The U.S. approach seems—to someone who is not actively involved in the cases at hand—to be erring on the side of treating crypto assets as securities, for want of an alternative classification, which would bring them within a traditional and well-established regulatory purview,” he said. “This would have an immediate and chilling effect on the US market.”

He added that the developments are not just significant for the U.S. but for the rest of the world as well, noting that while regulators in the EU and Asia “may seem more flexible currently,” they are “only one broker or trading platform blow-up which hits their constituents hard away” from imposing a regime as harsh as that of the U.S.

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